Using The Accounting Equation For Transaction Analysis

Using The Accounting Equation For Transaction Analysis T

P1-41ausing The Accounting Equation For Transaction Analysis T

P1-41A Using the accounting equation for transaction analysis Total Assets $19,425 Christopher Turner started a new business, Turner Gymnastics, and completed the following transactions during December: Dec. 1 Christopher contributed $21,000 cash in exchange for capital. 2 Received $3,500 cash from customers for services performed. 5 Paid $200 cash for office supplies. 9 Performed services for a customer and billed the customer for services rendered, $2,000. 10 Received $300 bill for utilities due in two weeks. 15 Paid for advertising in the local paper, $325. 20 Paid utility bill received on Dec. 10. 25 Collected cash from customer billed on Dec. 9. 28 Paid rent for the month, $2,000. 28 Paid $1,250 to assistant for wages. 30 Received $1,800 cash from customers for services performed. 31 Christopher withdrew $5,000 cash from the business. Analyze the effects of the transactions on the accounting equation of Turner Gymnastics using a format similar to Exhibit 1-4.

P1-42A Preparing financial statements Presented here are the accounts of Gate City Answering Service for the year ended 31 December, 2014. Net Income $86,900 December 31, 2014. Land $8,000 Owner contribution, 2014 $28,000 Notes Payable $32,000 Accounts Payable $11,000 Property Tax Expense $2,600 Accounts Receivable $1,000 Wayne, Withdrawals $30,000 Advertising Expense $15,000 Rent Expense $13,000 Building $145,200 Salaries Expense $65,000 Cash $3,000 Salaries Payable $1,300 Equipment $16,000 Service Revenue $192,000 Insurance Expense $2,500 Office Supplies $10,000 Interest Expense $7,000 Wayne, Capital, 12/31/13 $54,000

Requirements:

1. Prepare Gate City Answering Service’s income statement.

2. Prepare the statement of owner’s equity.

3. Prepare the balance sheet.

P2-29A Cash Balance $69,880 Journalizing transactions, posting journal entries to T-accounts, and preparing a trial balance Vernon Yung practices medicine under the business title Vernon Yung, M.D. During July, the medical practice completed the following transactions: Jul. 1 Yung contributed $68,000 cash to the business in exchange for capital. 5 Paid monthly rent on medical equipment, $560. 9 Paid $16,000 cash to purchase land to be used in operations. 10 Purchased office supplies on account, $1,600. 19 Borrowed $23,000 from the bank for business use. Yung signed a note payable to the bank in the name of the business. 22 Paid $1,300 on account. 28 The business received a bill for advertising in the daily newspaper to be paid in August, $240. 31 Revenues earned during the month included $6,500 cash and $5,800 on account. 31 Paid employees’ salaries $2,500, office rent $1,000, and utilities, $400. Record as a compound entry. 31 The business received $1,140 for medical screening services to be performed next month. 31 Yung withdrew cash of $7,000. The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Land; Accounts Payable; Advertising Payable; Unearned Revenue; Notes Payable; Yung, Capital; Yung, Withdrawals; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense; and Advertising Expense.

Requirements:

1. Journalize each transaction. Explanations are not required.

2. Post the journal entries to the T-accounts, using transaction dates as posting references in the ledger accounts. Label the balance of each account Bal.

3. Prepare the trial balance of Vernon Yung, M.D. as of July 31, 2015.

Paper For Above instruction

The following analysis thoroughly examines the impact of specific business transactions on the accounting equation, the preparation of financial statements, and the journalizing and posting processes involved in accounting practice. By exploring the detailed entries of Turner Gymnastics, Gate City Answering Service, and Vernon Yung, M.D., this paper emphasizes key accounting principles and demonstrates practical applications for accurate financial reporting and analysis.

Transaction Analysis of Turner Gymnastics Using the Accounting Equation

Turner Gymnastics, started by Christopher Turner, experienced several business transactions in December that significantly affected its financial position. The fundamental accounting equation—Assets = Liabilities + Owner's Equity—serves as the foundation for analyzing these transactions. Starting with total assets of $19,425, the transactions can be systematically assessed to understand their effects on the business's financial statements.

On December 1, Christopher contributed $21,000 in cash, increasing both the Cash asset and Owner’s Equity. This initial investment boosts total assets and owner’s capital. Subsequently, on December 2, cash received from customers for services performed increases cash and revenue, thereby increasing assets and owner’s equity through net income. Payments for office supplies, advertising, utilities, rent, wages, and other expenses reduce assets. Billing a customer (December 9) increases accounts receivable and service revenue. Payments for utilities and other expenses reduce cash and increase expenses, decreasing owner’s equity. Collection from billed customers increases cash and reduces accounts receivable without affecting net income. Finally, Christopher’s withdrawal decreases both cash and owner’s equity.

The comprehensive analysis of these transactions demonstrates the dynamic nature of the accounting equation and highlights the importance of tracking inflows and outflows to maintain accurate financial records. The effect of each transaction is reflected in the change of assets, liabilities, and owner’s equity, illustrating the interconnected nature of financial accounting.

Preparation of Financial Statements for Gate City Answering Service

The financial statements for Gate City Answering Service for 2014 comprise the income statement, statement of owner’s equity, and balance sheet, each presenting a snapshot of the business's financial performance and position. The income statement summarizes revenues and expenses, resulting in net income, which then impacts the owner’s equity via the statement of owner’s equity. The balance sheet presents the assets, liabilities, and owner’s equity as of December 31, 2014.

The income statement shows total revenues of $192,000 and total expenses of $57,100, including property tax, advertising, rent, salaries, insurance, interest, among others, resulting in net income of $86,900. The owner’s equity statement incorporates the owner’s contribution, net income, and withdrawals to determine the ending capital balance. The balance sheet lists assets such as land, building, equipment, cash, accounts receivable, and supplies, against liabilities like notes payable and accounts payable, with residual owner’s equity calculated accordingly.

Journalizing and Posting Transactions for Vernon Yung, M.D.

Vernon Yung’s practice involved multiple transactions in July, affecting various accounts including cash, accounts receivable, land, supplies, payables, loans, and owner’s equity. Journal entries record each transaction with debits and credits reflecting asset acquisitions, financing activities, and expenses. For example, the initial contribution increases cash and owner’s capital, while purchases of land and supplies increase respective asset accounts. Borrowing from the bank enhances both cash and notes payable. Payment of expenses and salaries decrease cash and increase expense accounts, reflecting operational costs. Revenue earned is recorded as service revenue, increasing assets, and accounts receivable when on credit.

Postings involve transferring these journal entries into T-accounts, with careful attention to transaction dates, facilitating the preparation of a trial balance. The trial balance ensures that total debits equal total credits, verifying the correctness of the recorded transactions and the integrity of the accounting system. This procedure exemplifies the fundamental process of accounting, crucial for accurate financial reporting and decision-making.

Conclusion

Overall, these accounting exercises demonstrate core principles such as transaction analysis, journalizing, posting, and preparing financial statements, which form the backbone of professional accounting practice. Understanding these processes enables accountants to maintain transparent, accurate, and compliant financial records that support strategic business management and legal requirements.

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